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Glossary of Terms

APR

The interest rate charged on a loan, credit card, or mortgage over a year's time

Annual Fee

The fee charged annually by a credit card company to its cardholders. This amount is added to the cardholder's statement.

Bad Credit

An individual's credit rating is typically considered bad or poor if their FICO score falls below 620. Issues that drop a FICO score to such a level include defaulting on (failing to pay back) loans and credit cards, making payments past their due date, and/or carrying a high level of debt.

Balance Transfer

The transfer of an existing account balance (in part or in whole) to a different account, usually an account held with another creditor.

Balance Transfer Fee

The fee charged by a credit card company when a balance is transferred to one of its cards.

Bankruptcy

A legal declaration of one's inability to pay his/her creditors. In most cases, voluntary bankruptcy is initiated by the individual in debt (the debtor); in rare cases, creditors may file a bankruptcy petition against a debtor to initiate an involuntary bankruptcy.

7 Terms to Know When Applying for a Credit Card

Are you looking to get a new credit card, but you're not sure what the various terms mean? Let's take a closer look at the 7 terms you should know before applying:

1. APR APR is an acronym used for annual percentage rate. It is the interest rate of a loan or credit card within a year's time. The lower the APR, the less interest you are going to pay on a credit card balance. If you pay in full each month, APR is not of concern to you, as interest is only assessed on unpaid balances.

2. Grace Period Grace Period is the time you have before a credit card company starts charging interest on your new purchases. The grace period varies by credit card issuer and is usually a period of 20 to 30 days.

3. Credit Limit Credit Limit is the maximum balance that you will be able to carry on the card. The amount of the credit limit is determined by several factors, among them: your credit rating, your income level, and your past account histories that show on your credit report.

4. Annual Fee Annual Fee is the yearly fee charged by a credit card company to its cardholders. An annual fee on a credit card can cost from $0 to $450, though the cards on our site are on the lower end of that scale. This fee is added to your statement once a year and is added to your account balance.

5. Processing Fee Processing Fee is the amount that is charged to open a credit card account. It is also known commonly as an application fee. This fee covers the charges incurred by the credit card company in issuing you your card, such as application processing, card creation, mailing costs, and customer service.

6. Minimum Payment Minimum Payment is the least amount of money that you are required to pay on your credit card statement each month to keep it in good standing. This amount is calculated as a percentage of your total current balance. It is important to note that with compounding interest, you could end up paying for a long time if you only pay the minimum, so it is a good idea to pay more than your minimum payment whenever you are able.

7. Credit Bureau Reporting Credit Bureau Reporting means that a credit card issuer reports your account payment history to a credit bureau like Experian, Equifax or TransUnion, usually on a monthly basis. Reporting to credit bureaus ensures that your good payment history shows up on your credit profile and that you, in turn, are rewarded over time with a better credit rating. For more credit-related terms and their definitions, we invite you to visit our Glossary of Terms section.

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Personal Loans Disclosure: Offers provided to customers feature rate quotes on BadCreditOffers of no greater than 35.99% APR with terms from 61 days to 180 months. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history, and will be agreed upon between you and the lender. An example of total amount paid on a personal loan of $10,000 for a term of 36 months at a rate of 10% would be equivalent to $11,616.12 over the 36 month life of the loan.

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